July 10, 2012

Dreyfus faces lawsuit on inflating cotton prices

In one of the highest-profile commodity trading cases in a decade, a second plaintiff has filed a lawsuit accusing Louis Dreyfus of inflating cotton prices last year.

The lawsuit cited former Glencore trader Mark Allen's original lawsuit filed a week ago and contained similar allegations.

It was filed on Friday (July 6) by New York resident Robert Walford against companies including Term Commodities, Allenberg Cotton Company and Louis Dreyfus Commodities.

The lawsuits allege that Dreyfus exerted monopoly control over the futures market, and refused to buy physical cotton that was trading at lower prices on the spot market.

It's common for multiple lawsuits to be filed in cases alleging violations of laws governing financial markets. Typically a judge will combine those cases into a single lawsuit, to be handled by a designated law firm. Class-action status would if appropriate be conferred later.

Louis Dreyfus has yet to comment on the first lawsuit.

The lawsuits follow last year's upheaval in the cotton market, when prices in March reached their highest level since the US Civil War in the 1860s and then more than halved by July.

In that period, Dreyfus affiliates took delivery of most ICE cotton futures contracts at expiration, exchange data showed.